New Delhi: At 6.44%, India’s retail inflation remained above the Reserve Bank of India’s upper band (6%) for the second month in a row in February. The retail inflation in February was slightly lower than in January (6.52%), data released by the National Statistical Office showed.
According to Business Standard, the inflation being higher than the RBI’s limit for the second consecutive month may lead to another 25 basis points rate hike by the Monetary Policy Committee, which will meet in April.
The price of food items like meat, fish, eggs and pulses as well as fuel and light had eased a little in February, but continued to rise for cereals (16.73%), milk (9.65%), fruit (6.38%) and housing (4.83%).
Rural inflation, at 6.72% (down from 6.85% in January), continued to be higher than urban inflation (which was at 6.10% in February, up from 6% in January), Indian Express reported.
“Second consecutive month of more than 6% inflation makes the monetary authority’s job difficult. Impact of monetary policy is felt with a lag and monetary tightening of FY23 would push the inflation rate down. However, the stickiness of core inflation is turning out to be a major problem for the monetary policy committee… price trends and indicators available at present are making the monetary policy committee’s job difficult. However, India Ratings believes the odds are more in favour of another 25 bps repo rate hike in April 2023 monetary policy. India Ratings expect March 2023 retail inflation to be 5.7% leading to 4QFY23 retail inflation to be higher than 6%, five consecutive quarters of more than 6% inflation,” Sunil Kumar Sinha, principal economist, India Ratings, said.
“There is concern on milk inflation at 9.7%. The prices have been raised often this year – at least 3 times to adjust for higher fodder costs. These prices will never come down. Spices inflation has peaked at 20% which though has a small share in the basket is significant in terms of reflecting demand-supply mismatches. Prepared meals/foods have witnessed inflation of 8% as costs have been passed on. Here it should be remembered that prices are seldom reduced even when costs come down,” Madan Sabnavis, chief economist, Bank of Baroda, added.